In February, NSW Supreme Court Justice Lucy McCallum ordered The Age journalists Richard Baker, Philip Dorling and Nick McKenzie to provide all documents in relation to "the identity or whereabouts of the sources".

But days later, the journalists were granted a stay on the order while they appealed the decision.

In a hearing before the Supreme Court on Thursday, The Age's barrister, Thomas Blackburn, SC, said Fairfax was seeking leave to appeal Justice McCallum's decision not to admit into evidence the truth of a conversation between Ms Liu's long-time legal advisor Donald Junn and Mr Baker.

During the conversation, which is outlined in an affidavit by Mr Baker, the court heard that after Mr Junn was told of the allegations against Ms Liu, the solicitor suggested Mr Baker go back to Mr Fitzgibbon "and put to him that Helen Liu is considering giving him up".

"If Joel hears this, he will know that it is no empty threat," Mr Junn allegedly told Mr Baker.

Mr Blackburn also challenged Justice McCallum's finding that Mr Junn was not authorised to speak on behalf of Ms Liu.

"It's simply inexplicable that her solicitor would put such a proposal unless it was authorised," he said.

Mr Blackburn said that Mr Junn had "obviously spoken" to Ms Liu by then as he allegedly said to Mr Baker: "Helen is interested in the motives of the sources".

At no point, Mr Blackburn said, did Ms Liu deny the truth of the allegations.

"It simply beggars belief that the first respondent (Ms Liu) would not have instructed Mr Junn to say, 'I have never done anything wrong'."

But Ms Liu's barrister Bruce McClintock, SC, said Justice McCallum was "correct to reject the material".

During another conversation when Mr Baker asked Mr Junn if he had a "response from Helen" for the paper, Mr McClintock said the answer was `No'.

He said Ms Liu could not admit or deny anything, as there was no evidence that she had seen one of the documents - a handwritten list allegedly written by her to record payments to individuals, including Mr Fitzgibbon.

"It turned out that the document was not in Ms Liu's handwriting and that there were serious debates to its authenticity," Mr McClintock said.